A.What portion of the twelfth (monthly) payment on a standard 30-year fixed rate

Question

A.What portion of the twelfth (monthly) payment on a standard 30-year fixed rate loan with monthly payments goes toward the principal reduction if the stated annual interest rate is 5% and the loan value is $200,000?

$203.45

$251.56

$298.51

B.What portion of the payment made in the 200th month on a standard 20-year fixed rate loan with goes toward the principal reduction if the stated annual interest rate is 6% and the loan value is $200,000?

$1,234.53

$1,167.87

$1,054.98

C.The Axion Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has both a book value and a market value of zero; it is in good working order, however, and will last physically for at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently that Axion’s engineers estimate it will produce after-tax cash flows (labor savings and depreciation) of $9,000 per year. The new machine will cost $40,000 delivered and installed, and its economic life is estimated to be 10 years. It has zero salvage value. The firm’s WACC is 10%, and its marginal tax rate is 35%. Should Axion buy the new machine?

No, because the NPV is -$876

Yes, because the NPV is $15,301

Yes because the NPV is $8,453

$203.45

$251.56

$298.51

Explanation / Answer

a.2

b.1

c.2

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